It's happening again. People around me are talking about buying houses. I thought it went away back in 2007 when the Smug Homeowners suddenly found out that instead of Earning Money for Them their prized dwellings had turned into worrying liabilities. Instead of banging on incessantly about their precious house prices or property investments they fell strangely silent, the formerly property-laden Christmas round-robins preferring instead to obsess about the school choices for their super-intelligent offspring.
Sorry. I guess I can't help turning the knife. I had to suffer a decade of it and I became more than a little annoyed.
You see, in the decade before the banking crash in 2007 the British housing market grew in a frightening bubble beyond the reach of first-time buyers like me, sustained on a wave of investment buyers capable of paying any prices with their easy credit. The financial industry pulled the ultimate confidence trick of persuading the public that debt was equivalent to wealth, and they just lapped it up.
The housing boom passed me by for two reasons, I'm very debt-averse so I didn't jump in when I had very little money, and just as I reached the point at which I might have afforded a house along came the dotcom crash which pulverised my industry and gave me some serious career turmoil. Back then I was rather depressed about it, but later in the decade I realised that I was the fortunate one for being debt-free. If I lose my job or the economy goes crazy there'll be nobody chasing me for a quarter million quid I don't have.
So I'm rather surprised to see people talking about buying houses again. Younger colleagues, to be precise. Not old enough to remember the last time the economy went titsup back at the end of the '80s, none of them had friends who spent the '90s sleeping on their parents sofas paying for homes they no longer owned.
It all has that bubble feeling about it again. There's an air of "get in while you still can" about it which I find particularly frightening. I even had one of them repeat the hoary old chestnut "Oh, but you mustn't think of it as debt!" to me, to which I just laughed. In my book if the bank can take it back when you owe a single penny on it, you don't own it, the bank does. As I mentioned above, I had friends who learned that one the hard way.
I think they were a little surprised when I pointed out that I can buy a house if I so choose. I have both the savings for a deposit and the income to keep up the payments, and I'm confident enough in the security of that income to be less debt-averse than I was. But what I couldn't make them understand was why I am not taking that path,why instead my wife and I live in a comfortable but very small rental flat.
You see, there are three things that keep my cash firmly in my pocket:
The first is a simple aversion to the asking price. I don't think a house that is priced out of the reach of a first-time-buyer represents good value, if I have to borrow more than I earn in a decade to buy it then I think the bubble is well past its sell-by date. Let some other idiot take the hit.
The second is demographic. Most British houses are still owned by the so-called "baby-boomers", the generation born just after the war. They're the huge bulge in our population age graph. They bought the houses cheaply in the '60s and '70s and they've hung on to them. Now that generations's just retiring, and in the next decade they'll start to move into old people's homes. So given my first reason, why would I wish to buy something that's overpriced to start with, and is going to have a huge flood of similar properties coming onto the market as the boomers move out, before I'm half way through paying for it?
And my final reason relates to the economics of the moment. Interest rates are at a historic low, they simply can't go any lower in a meaningful way. There is even talk of negative rates as some kind of stimulus measure. Now you'd think low rates would be good, the best time to borrow, right? Can't say I agree. The problem is, as a first time buyer I'd be expected to go for my maximum possible repayment just to tread water with a mortgage, such is the amount I'd be expected to borrow. And there's the problem with low interest rates, when things go wrong and they're that low there's only one direction they can go, and that's up. As my friends twenty years ago found out, that means monthly payments into the stratosphere, and inevitable repossession. Not a risk I'd like to take right now, what with the economy looking so dodgy and all.
So my homespun housing economics 101 didn't make an impact on my colleagues. I understand their needs and frustrations only too well, I guess I would have been like them once. But I can't help some shock seeing them blithely signing their young families up for maxed-out interest-only mortgages in the midst of a global economic crisis.
An Englishman's home may indeed be his castle, but what use is a castle made of sand?